into ukraine. equities surged higher, emerging markets ignore europe's travails. it is not thanksgiving. we celebrate national bowtied day. good morning, everyone. this is "bloomberg surveillance." we are live from new york city. joining me, scarlet fu and brendan greeley. he is back a after day after day. are you holding up? no sleep? >> i'm doing all right. [laughter] it is 3:15 when i wake up. german unemployment unexpectedly rose in august. euro area economic confidence declined more than economists predicted. bad news is good news out of europe right now because it increases the likelihood that mario draghi will do something extraordinary. >> they are at the tipping point. we will have more on that in

"bloomberg surveillance." get initial jobless claims and personal consumption and second-quarter gdp. >> second looks at the second quarter. there are three looks. >> we keep revising it. --the media puts huge look stress on the first look. this is the in between. the bloomberg consumer index will for -- drop. earnings before the bell, abercrombie. dollar general. k, aill take a look at splun data analysis firm. >> national bowtie day. we are going to rip up the script. national bowtie day.

>> is your bowtie cloud-based? i'm celebrating national bowtie day in protest. we have breaking news i want to get to. the world health organization saying that more than 20,000 people may be effected -- infected with ebola virus before the outbreak is controlled. of the infections are happening within the past 21 days. >> there has been a change in tone over the last 24 hours. >> if this outbreak were happening in the u.s., this would be controllable.

it does not spread in an uncontrollable way. the problem is not the disease, it is the resources to combat it him a particularly in the combo -- congo. >> another breaking news set. this is moving the markets. yields are coming in. president poroshenko saying his security council will draw up further plans. situation in ukraine's east deteriorated sharply. let's look at equities, bonds, currencies, commodities. futures are deteriorating. the euro is well under 1.32. excuse me. onto the next screen. , the 10 year yield. the german yield sends to new record lows. >> they are talking about

poroshenko going to turkey. that is not happening now. >> it is not happening. >> he has canceled his trip to turkey due to unrest. >> we will cover that. the tension in germany is a bit sophisticated. this is our yield minus the german yield. this is german reunification, this is good germany, good united states. we are back up to a very relatively high u.s. yield versus a stunningly low german yield. rare between very these two dominant countries. let's get right to our front page. >> poroshenko staying home, not traveling to turkey to attend the inauguration. it is being called a stealth invasion, what we're seeing right now in terms of ukraine and russia. russian rebels have launched a counterattack.

so much for peace talks. >> this geography lesson will make you smarter about this this morning. we look at some of the real damage. the red spot is crimea. russia had that a number of weeks go. the theory is they want to build a land bridge from russia to the right over to that red spot. how do you do that? fromove 430 miles novoazovsk through mariupol, which is essentially pittsburgh on the black sea. russians were encouraged to take patriotic vacations and crimea. if you look down in the crimea and to the east, they are going

to try to build a bridge to russia, and actual physical bridge. that is going to take a long time. people have been waiting to get back and forth to crimea from the russian mainland. >> now there are two fronts in eastern ukraine. >> it is not just donetsk ben luhansk. and governments are slowly figuring out how to describe russia pulse role in this. -- russia's role in this. we are getting closer and closer to saying this is just russia. saying that really this is a war yet. i'm not seeing the war word used in any official capacity. onto our next

front-page story. this links up to what is going on with russia. jpmorgan and five banks hit by russian hackers. is according to people familiar with the investigation. no sign or report that the attack was used to steal money from accounts. the attacks linked to russian sponsored government hackers. >> the key phrase is that this is a zero day hack. this is an exploit that has never been used before. they're very expensive, very rare. one, they discovers say, what are you willing to pay me to get into a computer system in a way that nobody has figured out to do before? there was a lot of money behind these projects. his is not a kid sitting in a basement in romania. are reporting that it is hard

to believe that there is not a linkage to russia. >> by the way, this would be in retaliation for sanctions against russia. >> what else do we have? come on the verge of the biggest ipo in u.s. history, just released its second-quarter earnings. operating income of $1.1 billion. 42% more than amazon and ebay combined. these are likely to be the last numbers before we get the actual ipo. the roadshow is expected to start next week. the optimism, the frothing us. -- frothiness. alibaba's cash call will be $20 billion. that is a bit of perspective. it is like a double cheeseburger. >> double cheeseburger. yum.

>> with a doughnut on top. >> a burger king thing with a doughnut on top. we will keep you abreast of the headlines off the bloomberg terminal all through the morning. our guest host, jeff dennis, the head of global emerging markets at ubs. perfect to have you here today. should i sell because of ukraine or any other geopolitical risk? >> i don't think so at this point. were this to turn into a full military conflict, that would be a big market negative. this is still a bit of a stealth contest. a stealth contest is the way to read it. what surprised us a little bit is that we thought all the geopolitical events we are seeing at the moment, obviously iraq, syria, gaza, this

ukraine-russia thing, would lead to a break in oil supplies and push oil prices up. that has not happened. >> i want to jump in with bill gross three weeks ago. do you see instability because of these new low yields? the 10 year german. stunning yields. it has got to be destabilizing to the system. >> i am not a bond expert in respect of that. what clearly seems to be happening, given your chart as well, europe is a clear deflation risk right now and mario draghi needs to do something else in terms of quantitative easing. the united states is growing 3.5%. there are good reasons why you are getting this big divide. the low european yields could be a factor keeping u.s. down. geoff dennis >> with us the

entire hour. lending club firing for a $500 a $500 ipo -- filing for million ipo. the number of shares to be offered at him -- and a price will be released later. bill ackman is trying to fast-track litigation against allergan. the move is part of a $54 billion takeover bid. ford begins selling the new generation of its mustang. it will be exported to more than 120 countries. the 2015 mustang will start at around $24,000. >> a right-hand drive mustang? that is un-american. >> do we not need more of those

in the u.k.? [laughter] geoff dennis is all for it. >> malaysia airlines is losing customers and employees and is struggling to bring them back after the disasters. we will discuss this after the break. "bloomberg surveillance" on your tablet and everything else. smartphone, bloomberg.com, everywhere you go. we will be back. ♪

>> good morning, everyone. "bloomberg surveillance." -- jordann solo "in thewill be on loop" this morning. >> malaysia airlines. we had the two disasters within

four months. we are still trying to solve the first one. they have started to narrow the area where they have been looking for the flight. that continues. the airline itself is struggling. the company was supposed to report earnings. we still have not gotten them across the wire. what we know is that passengers are not taking malaysian airlines anymore and a lot of staff has quit because families don't feel safe with their loved ones traveling on it. >> the airline business is tough enough as it is. what we're learning is that it is not based on rational risk assessment. it is based in an inchoate sense of trust. violated, it been is impossible to get that back. -- difficult to get that back. >> the shooting down of the second jet was not its fault. it was a pile on after what had happened. the company is considering job

cuts of up to 1/5 of its staff and replacing the ceo. the company is looking to go private and be delisted. >> it is just heartbreaking. into kuala lumpur twice and i flew malaysia airlines. pride in airlines is tied into pride in the country. i remember when swissair collapsed it was a national tragedy. >> i have flown malaysia airlines at my travels around emerging markets. great experience. the way i view it and this is not a macro or market view, but extraordinary tragical incident happened to be a malaysia airlines jet.

it could have been any other jet . it just piled it on. >> within your abilities, they will account for this with the full faith and credit of the very substantial unsuccessful malaysian government. there will be another day for this carrier. as there was for swissair. >> without any question. even now, we don't know what the outcome will be. for the airline right now. the malaysian government can afford to inject some money into it. is similar to swissair, but they had to rebrand. they had to sell to the belgian airline. .here is a swiss airline historically, people don't make a distinction. >> the trouble with malaysia airlines is that before the two disasters, the company had been unprofitable for three straight years. it was facing competition from low-fare regional carriers.

the same kind of routes. >> it has not been a great environment for airlines for quite a while. >> this is further breaking news. i want to make clear that this is not the un security council, this is the ukraine security council in kiev. they are bringing out more information. bring up the map again, courtney, if you would. the south, southeast of kiosks -- kiev. a russian drone was downed. this is a report from ukraine, not from the news services. brendan, the one that interests me the most, the ukraine army pol.ing in near mariu it is ominous.

futures deteriorate in a little bit. >> off to something lighter. it is national bowtie day today. our twitter question of the day, if you have not ditched the bowtie already, have you ditched the tie? brendan greeley has. -- >> yes, i have. >> we are still trying to get tom keene to ditch the bowtie. ♪

morning, everyone. breaking news. we welcome everyone to "bloomberg surveillance." let me go to the markets. the attention is on ukraine. this is the u.s. 10-year.

you can see the abruptness on the headlines out of ukraine. the ukraine government is speaking through their security council about further russian action. 70 miles to the south of donetsk. here.n, help me between theght black sea and the sea of azoff is what separates rusher from the crimea. error people shooting at each other in ukraine. atthere are people shooting each other in ukraine. we all know that russia is driving this. authoritieskrainian are trying to get the west to use the language that we all know to be true, which is that russia is doing this. >> the wording this morning is fascinating.

i will go with "the new york times." stealth invasion. it is not very stealthy right now. this is the ukrainian government off the bloomberg terminal talking about a request for larger assistance. >> large-scale military assistance. >> than we have the u.s. and russia may be directing attacks as the fighting spreads, falling short of calling it an invasion. >> there are the delicacies of words this morning. let's go to our top headlines. >> speaking of delicacy of words, israel's prime minister, benjamin netanyahu defending his decision to end fighting on the gaza strip. he says his country scored a political and military victory and his goal of the hamas charge was achieved. this ended seven weeks of fighting. the votes will be counted for the new afghan president is still in dispute. one candidate is quote --

, steve ballmer's trying to keep him in los angeles. him $10ract will pay million annually. those are your top headlines. >> very good. let's get right to our morning must-read. and in greeley gets us started. ff this is perfect for geo dennis. statearcher at illinois studies the sociology of finance. he talks about how people think about markets. i know it sounds very touchy-feely. it is fascinating. he discovered the local traders believe that european and american traitors and malaysia have no idea what they are doing. traders in malaysia have no idea what they are doing.

coming into emerging markets from the outside, how do you become a serious investor? market global emerging investor, for example the malaysian market is not that big. they may well only have one or two stocks. they have made their picks and are probably holding them for a period of time. they are probably not trading. if you look at other bigger emerging markets, they are going to trade. >> we will continue this conversation on emerging markets . are they worth the premium, the risk premiums? we will discuss coming up. ♪

>> good morning everyone. welcome to our world headquarters in new york city. rendon greeley and the scarlet fu are with me today. when we do a data check. market on the move. much of the headlines out of ukraine. futures are now -8. 35.year yield at 2. you see a much weaker euro. i am surprised it is not much weaker. maybe more in order -- on the emerging market, not the trouble in this region. have seen global equities on a wild run with a rally.

approaching $56 trillion in value. as it bubbles over, involving developing countries, are these emerging markets good investments? our guest is the head of emerging markets strategy at ubs. when we look at the markets, they have stumbled a bit. then they kind of are covered over the last few weeks and months. we continue to drive forward. is that predicated on liquidity? >> i do not think it is predicated on that. it was a developing story on the developing markets. from the start of 2010 to the middle of 2014, markets changed dramatically. we are recovering from that. it is partly a valuations story. margin, the similar growth numbers in some of the emerging markets -- you certainly see that starting to bottom out a little bit.

i think that is encouraging investors to get back in. >> fundamentals of john people back in. that might be the reason you should stay in. when a stronger dollar be bad for the emerging markets? >> without any question. a sharp move higher in the dollar is negative for the emerging markets. it just happens that so far, this move up the dollar has been relatively slow and gentle. carry,he amount of those who have had to raise interest rates -- not only to those currencies hold up relatively well, but the big certain the dollar and big risk off move because of bond yields falling sharply, would time, emerging of markets under pressure. >> charles schwab was insisting on the stronger dollar. >> i was struck by the bad news

out of argentina. breath andd our waited for a panic in the emerging market. then there was not. when i think of that compared to the panic of the late 90's, do you think that we are becoming more sophisticated about where specific risks are? not just moving in and out of all emerging markets like a herd? >> i think that is true. you still have times where you move in and out like a herd. the point about argentina is -- it is not classified in that plea terms as an emerging market. it was a frontier market. not part of the emerging market index. >> i did not know that. >> that is one factor. the second thing is that this is not as big as it was in 2001. and, i think in a way, it was pretty well predicted. it did not have that big an impact. >> you don't think that is the

point in terms of increasing sophistication. >> i think it is. i also think -- i am sure they are getting smarter. they fundamentals are way better than they were. big current deficits, a surging dollar, fixed exchange rates. >> within this conversation, it goes back to the church. bring it up if you would. the idea of the emerging markets, compared to the larger developing market. >> they have underperformed for so long. >> 3-5 years. you wonder if it is a structural shift or just a moment. >> right, a reversal there. wasn to what brendan talking about, talk about how investors have eveolved over the years. it has gone to more established investors over the years. >> that is to probably the case.

there are a number of global emerging market funds. that youd to be those buy and hold for a long time. are thernational fund ones that have been underway for a long time. aree international funs beginning to edge their way higher now. is management playing a role? perhaps not as much. the big news will be the pension fund. if you look at the state -- the pension funds do very little each year. that could be where the next yield comes from. >> quick question about earnings as well. i know you forecasted 2014 earnings. you said 3% lower revenue. do emerging markets have the same scope as u.s. companies in cutting their expenses and massaging earnings? >> absolutely.

the point about the earnings number -- the decline in the rate of growth that we have seen this year is explained by a revenues and partly just our view. margins have fallen for 6-7 years in a row. that is because they have invested too much. they have the cost too high. a better use of the balance sheets, less investment, lower output, higher margins. it is clearly their overtime. >> it may be the best place to be away from full faith and credit. here's the u.s. 10 year yield. this is the news on ukraine. it is broken down. this is the actual bloomberg terminal. this is with the pros look at on the screen. when really, the pulse of the market, down to 3.3%. another letdown in futures, negative nine. that is a market on the move.

we will keep you abreast of this through the morning. >> we will continue with him as our guest host or the hour. coming up, we take a look at one particular merging market, brazil. to itsent value is tied presidential politics. this is "bloomberg surveillance." ♪

>> good morning. manhattan island of is wearing bow ties today. international bowtie day. something that chris tweeted out -- scarlet fu, where is your bowtie? >> i need one. >> good morning everyone. it is "bloomberg surveillance." scarlet fu and brendan greeley with us. let's get to brendan greeley now with the top headlines. >> christine lagarde, head of the imf, will have a chance to explain herself. she will meet with directors to explain her role in a french court decision. she is under investigation for negligence due to decisions she made as french finance minister. outbreakola spreads, the race is on for cures.

they will release an experimental vaccine as soon as next week. the death toll is now over 1500. headlines. top >> one more actually. >> and the kidnapped american journalist issued a plea. they say they will kill him if u.s. bombings are not stopped. in an interview, his mother asked that he be spared. >> as a mother, i asked for them to be merciful. it is something i have no control over. >> those are your top headlines. >> let's get to the single best chart. this is on the emerging markets from brazil. >> brendan greeley has just been there. >> yes. result has been leading the equity rally. is is theth best-performing benchmark in

the world. 36% -- the blue line tracks that rating of the president before the national election in october. so, they will presumably vote i er out of office -- the more the market begins to rally. the yellow line shows you one of brazil's biggest publicly traded markets. >> the problem with brazilian elections -- it was a problem before. it is now a problem for her after a term in office. they will never do with the say they are going to do. she said she understood markets better. i performed, i understand markets better. senseennis, do you have a of what any of these candidates will do? >> i think yes, we do have a

sense. in the sense that the right wing candidate, who has gone into the shadows a little bit now, given the burst of support for silva -- he will clearly be more of her former than the other two candidates. we know the details about what marina's reform plans would be. for me as a strategist, the problem i have with resell -- brazil -- first of all, there are two main ones. first, to get more investor friendly support. that is the charge they have been betting on for the last few weeks. >> the chief frustration is that she takes you to ask too much. >> and not allowing petrobras to perform. not allowing global price movement to filter through the domestic fuel prices. doing that is relatively -- needs to get the company

performing better. brazil's problem is that it does not grow enough because the public sector is too big. you need to cut pensions, cut wages, cut and women. thever wins the election, market is priced way too much in for a potential to reform. >> when is the election? october? >> first weekend of october. >> let's get to our photos. here is brendan greeley. you have your photos up there? i know this one. >> this is the ghostbusters. this is the 30th anniversary starring dan aykroyd, bill murray. >> is this hook and ladder 8 firehouse? >> that is the location where they set up their headquarters.

the bill murray role with supposed to be played by john belushi. i always wonder how he put -- would have done it. >> he made it his own. >> now i feel old. remember how to sing the song? >> do it. >> ghostbusters. >> who are you going to call? ghostbusters! >> a parachute jump during a flight contest in china -- three teams participated in the five-day event that started wednesday. >> those are very big acrobatic event. >> i was wondering if george h.w. bush was there, up top? >> our offices took the als ice bucket challenged to raise awareness for als research. one of my own editors, along with 300 other employees, took the plunge. 1!5, 4 , 3, 2,

[cheering] now, i notice he has not yet taken the challenge. should i take the challenge? yes! >> i like how mike play that role there. >> he was disappointed, we were watching from up in the office. he was holding his bucket, waiting in the wings for that. >> have you done the challenge? >> no. >> you are not going to. >> no -- i haven't yet. >> we have video of a two-year-old during the ice bucket challenge. it was charming. very charming. >> you were nominated, when are you going to do it? jeff dennis is waiting for you. >> you're a boston guy, right?

they were talking about the yankees, how the lady who does the interviews after the games, she kind of caught half an ice bucket on many occasions because of the way they tip it over a guy in the seat during the walkoff home run. she said, i have done it. hewe asked tom whether has done it. you were reaching for your coffee, i was a little bit worried. something dramatic was going to happen. >> guess what day it is? >> what day is it? >> national bowtie day. we will talk to the ceo of a tie bar. it is our twitter question of the day. would you ditch the tie? i never wore a tie. i have a picture of my grandfather holding me and he had a bowtie. >> i am sure. >> when i was three years old.

tweet us. if you ditched your bowtie. we need your spirited answer. i'm going to start crying. ♪

>> this is "bloomberg surveillance." let's gaze and company news now from the files of bloomberg west. raising their quest for gdt -- they have raised their application to $9.8 billion. the stock is going broadband. they meet today to discuss this. scrutiny for time warner cable after the national internet outage yesterday. andrew cuomo has issued a probe of the interruption. this could affect their attempt to merger with comcast. it is likely went back 30 years. and then the start up, square, is looking for financing. g the $6sey is eyein million valuation. 2t is said to be worth about $

million. >> and ian bremmer will join us on ukraine. we just got a new record low on the germans. we will attempt something lighter. it is a national holiday on august 28. for me, for carl -- for the late winston. it is national bowtie day. out in, out in. the bowties are so very in. the slaes have doubled -- the sales have doubled. is the chief operating officer of a tie bar. wonderful to have you. you look great. why is it? what change was it? did angelina jolie wear woone somewhere? where was the shift?

>> there were a couple of shifts. there was a shift back to more formal clothing. bowtie there a way to differentiate yourself a little bit. you can have personality in a way that you did not before. there've also been some new entrants out there were price points are different. you can buy a quality tie, the same as you would find a high-end apartment store, for $25. when you think about putting together a wardrobe, if you have to pay $100 for a tie, you cannot have that many ties. >> can you wear a bowtie every fourth day? you have to be committed? >> i don't think you have to be committed. i think you have to mix it up and find whatever your style is. i know people who wear them every day and people who never went on. >> you don't have to be a bowtie guy? you can change. >> no. >> what is this, dr. phil? >> i am not buying that. >> you just pointed out that i

am not wearing a tie. i hate to question your entire business model, but why do i have to wear a tie? bunch ofs a whole other reasons. not many people are as confident on national tv without a tie. a lot of people feel it is important to have one. it gives them confidence. what you are seeing is the more formal movement. is thethe big drivers recession. a lot of people are looking for work. of the nicer and look more formal. >> it is not just brendan greeley, many people do not wear ties. president obama getting off marine one without a tie. prince william when he does his tourney functions, no tie. silicon valley has changed the way that men dress. >> all of those people you named, you see in a time more often than you don't. i'll not argue that you have to

wear a tie for every occasion. the world certainly is changed. it went down to nobody wearing a tie. now it has come back and ties are becoming more popular. >> it will be where it was. >> i understand that. >> justin timberlake and jay-z really got into wearing suits and ties. we worked so long! >> is away a way for a man to make a fashion statement too. so do you. there?here a red tie in >> there is. >> is this an act here? what is the biggest mistake that people make when they buy a bowtie for the first time? i see the video from linkedin. what is the biggest mistake that people make? >> i think sometimes people are

more aggressive in terms of whether they pick a tie or bowtie first. people go right through the regular bowtie and they may want to have two in the wardrobe. you may want to have three ties. >> i think they're are too long and they end up out too far. they should do them shorter, and bring them in. am i right? >> sometimes they are not even behind them too much. the one behind is longer than the one in front. >> totally right -- >> great job. >> i really feel confident. look at me. >> as the evening goes on -- worse and worse. >> i was told once that when you lose your bowtie, it does not make you look cool. >> thank you so much. our great appreciation. wear a bowtie next time, geoff dennis. thank you so much.

terrific perspective, with respect to the markets. foreign exchange is relatively quiet. it is moving. gold is solid, love and knowledge. stay with us. ian bremmer will join us next. . ♪

>> it is not warm.

perhaps a stealth invasion, perhaps a counter offensive. russian denver tree crosses into ukraine. crushed i ever building cash flows. we ate dinner -- and will facebook company do? we're live from our world headquarters in new york. it is thursday, august 28. joining me are scarlet fu and brendan greeley. our guest host for the hour is howard ward of gamco. let's get to the morning brief. governmentan reported that unemployment unexpectedly rose in august. area confidence declined more than predicted. bad news. >> economic data in the u.s. -- we will see initial jobless claims and personal consumption

and take another look at the second quarter gdp. 9:40, we look at the comfort survey. 10:00, the national realtors association will let us know how we are doing with pending home sales. earnings -- abercrombie and dollar general before the bell. we have some breaking news. elation airlines has just reported two hours ago that it has come out and had a loss for the second quarter. that is $97 million. malaysian airlines have been losing money for the last three years because of competition from low-fare regional carriers. this is not a surprise. quarterly sales, $3.5 billion for the quarter. as you were showing us earlier, lots of empty seats on those flights. >> it is going to be a workout for a national carrier. at the end of the day, it is a

national carrier. they will get through this. >> they are taking it private. the parent company has already said that they want to buy out shareholders. >> series unpredictable and irrational. >> let's get to company news. >> jpmorgan is among the five banks hit by russian hackers. they were looted earlier this month in a coordinated cyber attack, according to people familiar with the investigation. the fbi is looking into the matter. there is no sign that the money was stolen from this account. alibaba has reported second-quarter earnings. they generated income of $1.1 billion. 32% more than amazon and ebay combined. the billionaires index now has jack ma as china's richest person. he is worth almost $22 billion. and ford begins building its second generation of the mustang. it will be exported to more than 120 countries.

there will even be a right-hand version. it will start around $24,000. that is the news. >> futures -8. it has been a remarkable summer of discontent. one day, we speak to syria. the next week, israel and hamas. now, ukraine. there is a second front in the battle of eastern ukraine. it is a 430 mile stretch from the russian border to crimea. joining us, ian bremmer from eurasia group. good morning to you. how radical is this second front on the caspian sea? >> i it is very important. the invasion was always plan b for russia. they did not want to have to engage formally with russian troops. they believe that they would be able to gain the influence they wanted to over a period of time

without that step. ukrainian offensive had threatened to beat the separatists. that persisted. that means that russia has basically moved toward plan b. over the last 24 hours, we have chipped into formal invasion. russia and ukraine, as countries sovereign, are now at war. it will be very difficult for the americans or the europeans to deny that reality. it does push both countries into policies that they have been trying to avoid. >> we saw a headline on the bloomberg terminal with ukraine. one of their officials was asking for large military assistance. what would that be? >> they need any help they can get. they love boots on the ground. they certainly want lots of material. like the kind of help that the americans are giving mtgehe

kurds. fighting isis is different from fighting russian regulars. we are not going to see direct nato or american military assistance coming in to put those forces or those troops against the russians directly. i think the point here is that there was a belief on the part of the ukrainian government and the markets that has been critically mistaken. that the ukrainians might be allowed to retake their territory. they would be able to rouse the separatists. that was absolutely never going to be tolerated buy putin. we have now seen that in a very direct way. not fightingts are better in the last 24 hours because the humanitarian aid has been gone from russia. this is clearly the direct intervention of russian forces. russian regulars on the ground in the region. that does clearly take us past

the rubicon of this fight. wrote yesterday for project syndicate that putin can overstep or reach too far. is that what he is doing this morning? >> i saw that piece. it was good except that what he is talking about is the fact that the long-term -- this is going to hurt putin. he could lose support within russia. his economy is not doing well. all of these facts are true. they do not help ukraine. you want to ask me who will get hurt in the next year or two years? the economy is now going to collapse. it will not have gas. the government will come under massive pressure for having locked the territory. they will start losing the military battles against the russians. the americans and europeans will see lots of great things to ukraine.

we will not prop up their economy. so the fact is, we will support nato allies. ukraine is not a nato ally. they acted as if they thought they could gain some status of the poor. they are wrong. they have failed. this will lead to much greater economic implications, negative implications for the europeans as well. russia absolutely is taking steps that you and i would not want to take if we were running our own western developed economies. putin is not running a western developed economy. this was evident from day one. >> we have been talking about western capitals. there has been a dance over what to call this. can we finally call this a war? >> i think that you and i are allowed to call this a war. it is unfortunate for ukraine that the only country that really has a strong vested interest as a government is ukraine itself. the americans and the europeans really do not want nato calling it an incursion. the u.s. ambassador to ukraine

is a very smart fellow. also calling it incurs in. clearly, he has been giving marching orders. we're are not calling it an invasion yet. calling it an invasion is a direct change in policy. it will be interesting to see how long they can maintain that dance. >> thank you so much. continuing headlines out of europe and out of ukraine as well. joining us this morning, howard ward of gamco -- scarlet fu has something first. >> whether it is direct intervention -- comment or no comment. not commenting on the russian allegations. russia standing back and not say anything. >> that is amazing. usually they just dismiss things. here is the parlor game. howard board has chosen to try to ignore this, even i has he follows it take by-kick.

ten yield -- the ten year yield 30.2. why are stocks moving higher? >> the pace of economic growth continues to improve. all most all of the recent data has been better-than-expected. we're looking at an economy double check it at 2%. earnings estimates are not going down. they're edging higher. against that backdrop, you do have extraordinarily low interest rates. the discount rate for stocks is lower. the value of those earnings is higher. and if handicapping geopolitical risk, whether russia or ukraine -- it is extremely difficult to do. this particular situation in ukraine is probably going to be a long-term concept -- conflict of some sort.

it will be localized and have very little impact on the economy. more of a problem for europe, especially germany. it is not a game changer. >> yes -- i have had many e-mails. we will speak to howard ward about cupertino, california and their shares. i think they are doing better. >> they're doing better. i know that howard has a big investment in apple. coming up, russian hackers may be trying to get back at the u.s. by targeting u.s. banks. we will bring you the full story, with the guy who broke it. we are on bloomberg television and radio. brendan, and i will be right back. ♪

>> good morning everyone. i am tom keene. scarlet fu and brendan greeley are with me this morning. >> our guest host is howard ward, chief investment officer at gamco. he is less word about geopolitics than the earrings -- earnings potential. with you think about burger king's purchase of tim hortons? it is a good deal in terms of they have to do what they have to do? >> i'm not exactly a bull on

burgers and doughnuts, especially in the united states, where it is a saturated market. this is about international expansion and efficiencies. yes, it is about taxes. i think it is a good deal for both companies. i think the combined company will have high profits, that each would have separately. i think it is a win-win. >> from that perspective, we did see a lull for a wild. walgreens said that it would not go forward. there is some political pressure that we are starting to see. >> this is very misplaced print washington is criticizing companies that are doing tax and versions, but let's be clear -- the tax code is a creation of the united states congress. these companies are charged with maximizing profits. if they can maximize profits by doing a texan version, it makes

it easier for them to expand in the united states. so, it is not an easy playing field. if you don't like the tax code, change it. o'neill, when he came in as treasury secretary he wanted to change it. it did not work. dave camp has been doing yeoman's work for two years. it sank. how can we be confident it will happen? >> this speaks to the dysfunctional congress. and a white house that is lacking leadership. you passee you that if a law tomorrow to eliminate the 35% tax on repatriated profits, this issue goes away. >> oh no, the vodka. >> i got a little excited. this whole issue will go away. >> i feel that way about tax reform too. >> if you want to create jobs, this is america. we should have a competitive tax code. we are not competitive now. >> can we reform without

reforming personal tax as well? >> i think you can, if you wanted to. you don't have to do a lot here. just attack this issue. or you can go for the whole thing. >> did you break your coffee mug? >> somebody just took the ice plunge. >> coming up, i will talk about this bull market. earnings and cash flows. stay with us.

>> good morning everyone. the response is overwhelming. if you ditch the tie -- >> not just bowtie. >> tie in general. it is national bowtied a. there is a national tide day as well. if you ditch the tie -- that is the question. we thank you for your heated responses so far. already ditched the

tie i put on 20 minutes ago. >> you never wore the time to begin with. >> practice makes perfect. good morning, everyone. joining me is scarlet fu and brendan greeley. adam johnson is on vacation. >> a giant tie on right now. >> patriots nine. >> very good. let's get to the top headlines. >> we need to talk about the new front in the ukraine conflict. russia's role there is thinly disguised. they now control a key city. they say they are freelancing while on vacation. more than two months after votes were cast for a new afghan president, how money will be counted if dylan dispute. one candidate is boycotting the audit. the result is now in doubt. the mother of a kidnapped american journalist issues a

plea to the captors. islamic militants say they will kill stephen if bombings are not stop trade and internet video shows that he asks he be spared. empathy.for that is something i have no control over. >> he has been missing for over a year now. >> we should say also that markets are a little bit better over the last 20 minutes. jpmorgan at least four other banks may have been targets of russian hackers, in retaliation for u.s. government sanctions. according to people familiar with the situation, the fbi and nsa are investigating. mike riley broke the news and now joins us from the washington bureau. mike, russian hackers could mean a lot of different things. what does it mean in this case? >> it could mean a lot of different things. they are trying to decide what it does mean. we do know that one of the banks, the victim banks, has

already identified hackers. russian, but state-sponsored. that indicates there is some hand of the government behind this. that is a competent it question to answer. i think the investigation going forward will try to do that. i think these are criminal. there's this gray area between what is criminal and what his government. it is really hard to sort that stuff out, but that is what investigators are trying to do. >> you mentioned that this is a zero day hack. >> that usually indicates something pretty significant in terms of sophistication. in this case, they used an unknown vulnerability in public facing web application of the banks. this is essentially the bank's front door. they spent a lot of money and a lot of effort to make sure that you cannot get into the front door. if you can get in, you cannot go anywhere else. they not just got in, but they were able to get in and go and

steal confidential and client data. that is a very big deal. that is one of the things that so concerns the bank. these guys are really good. >> you wrote the cover for bloomberg businessweek about the nasdaq hack in 2010. there was a zero day hack involved there as well. how am in a that attack is this one? >> it is interesting. is fors how difficult it the nsa to determine who is behind this. they thought at the beginning that it was the russian government. then they decided that china might be involved. then they went back to the russian government or some version of russian hackers. i was talking to a source yesterday and he reminded me of that event, in terms of this investigation. it will be some time before they do this. the one thing those two hacks have in common is that they are sophisticated. >> you're the expert on this.

you are known worldwide for your sophistication of jpmorgan and citigroup. as simple as vladimir putin picking up the phone and k and saying goac after the american banks? >> something like that certainly could happen. one of the things that we have seen with russia and people who have been watching russia and the hacking space will point out that there is a lot of connection between russian government and criminal hackers. often, those hackers end up doing the bidding of the russian government. in estonia and georgia, we saw attacks, very effective against government targets. there is this theory about russia that the criminals are given a wide lease to operate. if they do not hit russian targets -- when the russian government needs them, they can respond. is this one of those examples? i think that is what they're

trying to find out. >> i am curious that if this is a government action -- how good are we at this? can the u.s. do this back to them? >> the u.s. can certainly do this back to them. they probably will not. there is a clear directive, and executive order. the white house has decided it will not respond to a cyber attack with a military reaction unless it meets two criteria. unless it means a serious economic harm or loss of life. it seems unlikely that this will meet that bar. >> it is just the threat of the information that was stolen is there couldeed? >> be economic harm. they could be harm to the bank and the customers. whatnk the white house, they look at is serious harm to the economy. so, this is really going to be on the banks. i don't think i would look to the white house or the u.s.

military for a response. >> we will be watching this today. >> the south with the movie i just watched on the airplane. that jack ryan movie where they did something with the russian hackers bank accounts. ads are everywhere. could we enter a time where they disappear? ♪

♪ ♪

♪ this is "bloomberg surveillance." as they ebola outbreak worsens in west africa the race for a cure is on a medical labs. glaxosmithkline will begin trials of its experimental vaccine next week. than 20,000 could be infected before the outbreak is controlled. lending club is filing for a $500 million ipo in the u.s.. it's platform let's borrowers bypass traditional banks. the number of shares to be offered and the prices to be determined later and morgan stanley and goldman sachs will manage that. fore is a bid that is one -- bill ackman two

per route -- toured place part of allergens executives. >> our guest host is howard ward. apple shares were priced at $67 when it was suggested that samsung would not run over apple. he buys now at $102. about apple quickly, can you acquire shares in this new product release? >> i think you can but you have to understand the big mis pricing and apple shares has gone away at this point. you're looking at a $600 billion market cap on the equity enterprise value which is more like $450 billion. they have $150 billion on the balance sheets of its a big company. the law of large numbers will come back in the growth will be outstanding but it should be a

10% kind of stock. >> do you have a calculation of their annual dividend growth? i would say dividend growth will be similar to the earnings growth for the company. you should expect more than that. >> there are so many other companies out there. will apple continue to buy back shares or will we get an investment scenario? >> it is a unique company with $45 billion in free cash flow which is greater than eight incent in they are investing the business, they are increasing their dividends and paying dividends and buying tax stocks. they're also making acquisitions of they are using that free cash flow. i think this will help them continue to lift the stock especially into this september release of the iphone six. >> what about industrial companies? is the rest of america doing the same thing? >> this is a common theme. you can pick honeywell as a stock or b aerospace --

>> they don't get the press that apple gets. >> they don't but even ge buying back stock and raising dividends, they have been trying to get its dividend back to where was. >> labors did -- labor day is sort of a new year's day. what is different now about the corporate ethos of managing cast versus three years ago? >> i think it's much more shareholder friendly in terms of returning cash to them. free cash flows are higher and there is a better crop of executives running companies today. they are managing their businesses very efficiently. they know that the shareholders are rewarding them for returning cash to them. >> is warren buffett and un-american person because he is moving burger king and tim ho rton together?

>> he is a great patriot and that is absurd. i would argue that companies doing tax and versions is because it makes it easier for them and cheaper for them to invest in the united states and they are doing the u.s. a favor. all, the tao is 17000 and you win. >> let's get you a data check -- lower onad taken a leg geopolitical headlines out of ukraine and russia but it seems we have come back a little list and pair some of the losses and the s&p 500 made another record high yesterday, closing above 2000. everyone is keeping an eye on when the nasdaq will hit a record high before anyone concludes that we are in overheated territory. >> i think my job keeps getting easier on these yields. i wake up and read the headlines and safe flight to quality. what about the currency

market? you would think the euro would be lower than where it is now. >> but it has been fairly resilient but a stronger dollar has been the thing the last couple of weeks and that continues this morning. this is "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire. i am scarlet fu with tom keene. this week.n is off our guest is this hour is howard ward of gamco. let's get you top headlines -- israel's prime minister hit back at his critics. he defended his decision to end fighting along the gaza strip. a says his country has scored military and political and moral victory. 54% of israelis say there was no clear winner. imf chief christine lagarde explains herself after meeting with directors to explain her

role in a french court decision. she is under investigation for negligence which is tied to a 2008 decision she had made as french finance minister and she has denied any wrongdoing. the new l.a. clippers owner steve ballmer moves to keep his coach doc rivers who has agreed to a contract extension that runs through 2019. the new deal will pay him more than $10 million annually. he helped the team when a franchise west 57 games last season. >> this month, the atlantic is -- featured an apology from the man who helped pop-ups become a thing. it was a programmer as is now the the rector of m.i.t. civic media. he hopes we enjoy a more secure web. he joins us live on skype. i have none you for a long time but i want to make sure that i get your apology. you are sorry you invented the pop-up ad? >> i'm sorry i brought that into

the world. i was working with the company which hosted home pages for millions of users. was in late 1996 and it was the best way to put an ad on the webpage and i am not responsible know inother things we the contemporary web but i had a hand in bringing the pop-up to the world. >> what was the road not taken? what should we have done instead? companies like the one i was working for which was an early social network service, we should have thought about subscriptions earlier. for things like facebook and e-mail which we are used to getting for free, i think we have to get better at paying for them and putting real money on the table for them. >> do you think that's possible that we could live in a world where we pay for gmail or facebook? >> it's already happening. i pay for gmail and many people

do for extra storage. i don't think it would be that difficult for heavy users to pay usage fees. there are other companies out there that are starting social services. ard whichaboutpinbo does no tracking and works on a flat fee model. there are people making it work just not popular with venture capitalists. >> in the meantime, we deal with an ad supported internet. in your article, printed newspapers may be dying but they make about four times as much someone advertising as like facebook does which is incredible. >> that make four times as much with about half as much attention which gives you a sense for how cheap our eyeballs are on the internet. we are really bad at persuading advertisers. if you think about it, or attention is not worth very much when we're looking at facebook. we are trying to catch up with

friends, we are not interested in buying something at that point, and the market has rationally figured out we are not particularly good clients were advertising at that moment in time. we are better when we are looking at a print newspaper. >> how do we put this back in the box? >> i would love to pay for access to e-mail but i don't see that is becoming an option. how do we get this done? it's a beautiful idea. wrong, theyhat's don't make more money by tracking you. you look at something like facebook's numbers, your attention while using facebook is worth about one penny per hour which is a remarkably low number. for some i fester to make my, they would make significantly more not -- more minor if it -- more money if you are paying five dollars per month. we will have to try subduction models or micro-payment models. we will probably try to nation models at some point but we have

to try everything because none of us are happy with where we are now. >> apology accepted, thank you. s. -e will discuss bow tie our twitter question of the day -- ♪

morning, everyone.

a tumultuous morning. we are down negative nine and s&p futures. the news is mostly out of ukraine. futures are negative five and out futures are -40. betty liu has a special interview coming up this morning. she has some news about a recent visit to croatia where she visited the aig chief executive officer, ben moshe a. how did it go? >> it went very well. i had never been to croatia. this was a unique opportunity to mosche who is one of the best among his peers among wall street ceos. people of asked him and asked me why croatia? he has a villa there. he also has a vineyard. he has a family wine and he is soon to be exporting that which is a second career for him. >> is he on vacation are working

from his fellow? >> he is half-and-half. he will be retiring on september 1 but he has had a huge five years at aig and did what many thought was impossible turning around the company and paying back taxpayers $82 billion with a $20 billion profit as well. i went to visit with him and talk to him about his last five years, his legacy of what he will be doing in croatia and you see we are in the old city in dubrovnik. >> isn't that where they film "game of thrones?" >> it is, i did not get a walk-on part. >> season five, betty liu. i could be a dragon tamer. i'm a little practice. we alsoious note,

talked about his own personal battle. he was very open during his tenure about his battle with cancer. the board informed throughout the last few years about that. own shares of you aig and how that affected his cancer and how you think that affected his management or did it/ >> i don't think it affected at all. he has done a trip -- a terrific job in aig is selling below but we could see that the 20. our viewers don't always understand how big aig is relative to the industry. they are the ge or an apple of the insurance business. >> they are the largest insurance company in the world. bear in mind, the problem they had in 2008 had nothing to do with their insurance business. it was the derivatives unit that got them in trouble. >> we will have some exclusive details about his personal help and situation.

that is coming up. >> we look forward to that, thank you so much. betty liu with a special interview with bob benmosche. surveillance, russian separatists advance in southeastern ukraine -- is it in invasion? willremmer think so and we discuss the latest unrest in our agenda is coming up. this is " bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire. we will be right back. ♪

>> good morning, everyone. willrow, francisco blanche join us. oil has not moved this august. he will join us tomorrow on "bloomberg surveillance." our guest host this hour is howard ward of gamco. telefonica raises the stakes in its quest for gdt. it has upped its bid for the vivendi unit. they offer counters from arrival. it is one of brazil's

fastest-growing broadband/internet providers. scrutiny for time warner cable after yesterday's national internet outage. new york governor andrew cuomo ordered a program of the disruption. the investigation could affect the company's plan to merge with comcast. some 11 million so scrubbers woke up to no internet access. squarepayment startup is looking for financing. they are eyeing a $6 million valuation. the company said to be seeking about $200 million. it is about the markets out bloomberg. howard ward has enjoyed too many bear markets. many are not in the market. the scars of 2008 pervade but exactly how much decline in your wealth can you stand right now? i would say this is a sea change. i see too many people who are

down five percent or so. we have forgotten that supposed to go down. that's part of the game. >> historically, the average volatility for the market is about a 70% move up and down. move up andt a 17% down. the s&p 500 is now triple off the 2009 low. it's about 30% higher than the 2007 peak. i would be expecting this massive stampede by individual investors in the stock. we have not seen that. we have just seen a trickle so far. i think that is promising. it means the bull market is further to run. retail investors are not fixated on the s&p 500 but more on the dow as a psychological indicator and the real test will be of the nasdaq tops its record high. >> the nasdaq is around 4500.

it will inch its way up there and eventually will break through. all of this momentum sooner or later will suck in more investors and they will chase returns. i will admit this time that it's a harder sell to get the individual investor to be enthusiastic about stocks. >> 2008, i talked to a 30 year wall street veteran whose of the problem with wall street is that nobody has been through a crisis of a don't know how to handle it. many people a been through a crisis for the last five years. are you confident they know how to handle it? >> there are different kinds of crises that could develop. my message primarily to the is a commonommunity one which is you cannot successively -- successfully time the market. for most people, the best course of action for them during the bear market of 2000-2002 and the

bear market of 2000-2008 was to stay invented d'este invested with your long-term investments. >> is there too much media? is it scarlet fu's fauolt? >> i don't think that's at all. >> wait a minute. >> people have to strip the decision-making and people panic when they see the market starting to go down. it was a correction four weeks ago which was a joke. was four point nine percent. are people scared of a bull market because of what the federal reserve has done and what the european central bank may do? >> ironically, what's happening in europe with the slowdown in growth there and the increasing that there can be some quantitative easing in europe, it's showtime, let's see what you will do. do something.

the record low yields you are seeing in europe right now is pressuring our yields lower. for is providing some cover the exit of quantitative easing here without disrupting our bond market. this is playing out relatively well for the u.s. equity investors, keeping our rates down, and now you've got this promise of qe in europe which might provide additional fluff. >> what is the bad news that will make europe do something? >> what is he waiting for? it's an analysis paralysis. especially now with the situation with sanctions on europe and russia and pressuring european trade with russia and germany growth and as we get into the cool season, europe will get1/3 of its oil and gas from russia and russia will get more leverage. you frame 20,000 on the dow? can you extrapolate that out? >> pick your number for what you

think earnings will grow at. let's say seven percent. ap/eu think we will have of 16 or 17, you will get there in a couple of years. >> meantime, let's get to our agenda where we take a look at the stories today. i is think mario dragh important. stay with us all day we will keep you up to date on the headlines we see across the world. this is really not good and you wonder how destabilizing this is for europe. >> it's not good. you have to wonder what is going on in vladimir putin's mind. for the russian economy or the people and yet his personal approval ratings go up and russia. they like this national fervor but it is bad for them and they will pay the price for some. of time. -- for some. of time --period of time.

>> i am looking at the german economy. there were higher jobless claims than expected this morning. if we learn anything in the last five years, it's that it germany wants to get it done, it will get done. i'm trying to figure out what will make germany start to panic and push for actual action from the ecb. if not now, when? >> we will see. this is the question that plagues the market because germany is tied into the european economy. my agendas on u.s. economic data. we have initial jobless claims and pending home sales. pending home sales comes out at 10:00 a.m. and the consensus is for a gain of 0.5%. the recovery have been -- has been in fits and starts. let's get to our twitter question of the day -

i quietly took my tie off one day and no one told me to put it back on. >> these are some of the answers -- >> investors are tie only. >> no bowties at demko? >> there is a couple but not that often. it's like you know you what you are doing. it's centered well and no creases. >> what about the millennial guys who come in? to not are not allowed have a tie. we have a dress code. >> you cannot see it but his shoes are shined. >> white shirts are preferred,

old-school. >> how about this for another answer -- you must have tweeted in. >> i did. >> it goes back to the idea of the silicon valley ceos and entrepreneurs. when investment bankers are in the valley trying to get in on deals, they open up their shirt collar. >> there is a complex power relationship between the decision to wear or not wear a tie. a tie on in silicon valley to let them know i am serious. >> when you visit companies in the tech world, do you wear a tie? >> we always have a tie on but it's much more relaxed in california. when howard is in california, i put a hoodie on over the type. >> thank you so much for joining us this morning. howard ward, chief investment officer of growth equities at

gamco. bloomberg surveillance continues on radio and betty liu has an exclusive conversation with ceo coming up benmosche on bloomberg television next. have a great rest of the morning. ♪

>> good morning, it is thursday, august 28 and we are live from bloomberg world headquarters. attached --ers have

attacked jpmorgan for other banks. they lost customer data and that attack may be in retaliation for western sanctions on russia. the ukraine says russian troops have invaded to help pro-russian rebels print a rubble counteroffensive have spread to areas of ukraine untouched by the fighting. ukraine is asking for large-scale military assistance. dollar general says it is still committed to the $9 billion takeover of family dollar stores. dollar general just reported second-quarter earnings that matched estimates. we start up with a very special interview i did a few days ago with the man many believe symbolizes the financial crisis. he is the 6'4" ceo of aig, bob benmosche who was about to step down in the next week after five years at the helm. he battled to turn around the ailing insurance giant and pay u.s.